Ask Our Experts 12/16/2018


Q: What were some of the key issues and events that helped shape policy and contributed to the public markets’ up-and-down movement in the cannabis sector during 2018?


From former U.S. Attorney General Jeff Sessions’ rescission of the Cole memo in January to Canada’s establishing itself as the first Group of 7 nation to fully legalize cannabis in October 2018 brought a number of groundbreaking developments to the cannabis sector.

Cronos Group (CRON) became the first cannabis cultivator to begin trading on a major U.S. stock exchange. Prior to receiving Nasdaq listing approval on February 26, Cronos had been working closely with them to get approval for an over-the-counter listing in late 2017. Cronos’ six months of preliminary work leading up to the application filing paid off, with the company ultimately receiving a listing. Cronos’ adoption of the strict U.S. SEC standards and preparatory work with Nasdaq prior to filing its listing application serves as a great example for other cannabis companies with plans to list on major U.S. stock exchanges. Furthermore, Cronos’ Nasdaq listing is beneficial for both the company and U.S. investors, as Cronos now has access to U.S. capital, and U.S. investors can own shares from one of Canada’s largest licensed producers.


Aurora’s investment in The Green Organic Dutchman Holdings (TGOD) and the acquisition of MedReleaf grabbed headlines in 2Q 2018. On May 2,  TGOD completed its initial public offering at a price of $3.65 per unit on the Toronto Stock Exchange. Prior to the IPO, Aurora partnered with TGOD and invested $55 million USD for an approximately 17.5% stake in TGOD. Simultaneously, during the second quarter of 2018, many Canadian cannabis companies rushed to increase their production capacity as Canada prepared to legalize recreational use for adults. That led to Aurora Cannabis’ acquisition of MedReleaf for approximately $2.5 billion USD on May 14  to position itself among the top-tier licensed producers in Canada. The $2.5 billion USD acquisition was the largest deal of its kind in cannabis.


In June, the FDA’s approval of GW Pharmaceuticals Epidiolex, a cannabidiol (CBD)-based drug to treat two rare forms of juvenile epilepsy, set the stage for CBD to be rescheduled by the Drug Enforcement Agency (DEA). At the time and under the Controlled Substances Act, Epidiolex was a Schedule I drug. On of September 27, 2018, however, the Department of Justice and DEA announced that Epidiolex would be rescheduled as a Schedule V drug, allowing GW Pharmaceuticals to begin selling the first FDA-approved drug derived from cannabis. After the markets closed on September 27, 2018, GW Pharmaceuticals stock price surged more than 7%, representing one of the company’s top-performing days in 2018.


After months of debate between the Canadian Senate and Parliament, Bill C-45, also known as the Cannabis Act, was approved in June by the Canadian Senate, with Prime Minister Trudeau announcing that the bill would take effect in three months. On October 17, Canada became the second country in the world and the first G20 nation to fully legalize recreational cannabis. Canada’s economy is thus positioned to benefit substantially from early mover foreign investment in the cannabis sector. As full adult-use markets continue to come online throughout the provinces, investments in Canada’s capital markets are likely to continue.


As discussed in today’s blog, while 2018 proved to be a historically lively year, the passage of the new U.S. Farm Bill promises to bring ever more activity and surprises in 2019.